Haresh Raghwani, director and chartered financial planner at Craufurd Hale Wealth Management, says: “As an adviser, you have a much better understanding of your investment proposition and can really be on top of changes and reduce time on admin.
"The main benefit I see is that you can spend more time with your clients and focus on the things that really matter: creating a financial plan, producing a cash flow model.
“If you do not have a CIP, then you spend hours each time researching and evidencing a solution that you may not know at all. You may end up making a recommendation that you may never use again.
"You have no real understanding how the underlying strategy operates, the service levels, the strength of the teams that run the portfolios. You create unnecessary risk as some portfolios may be not aligned to the risk profile your firm uses.”
Advisers can also access economies of scale through a CIP, which then lowers the overall costs to clients.
However, an argument that is sometimes made against CIPs is that they do not always allow for the investment approach to be tailored to a client’s needs.
Interestingly, Aegon’s Retirement Advice in the UK 2022 report found that 41 per cent of advisers surveyed had no intention of adopting a CIP. Of this group, more than 80 per cent said the main reason for this was that they preferred to tailor advice to the specific needs of the client.
However, over the years CIPs have become more reliable. In fact, Raghwani argued that a well developed CIP can still provide flexibility to allow an IFA to tailor investment to a client’s individual needs.
He says: “In my view a good CIP essentially does the heavy lifting. A good CIP is only good if you put in the work to create a robust CIP. It also shows that you are not just simply shoe-horning clients into one solution. It also helps you understand your own client base.
“Clients can see that you’ve spent a considerable amount of time to ensure that they receive the best recommendation for them. You have no bias.
“Having a good CIP reduces time, which also reduces costs, you can negotiate better fees for your clients, and ultimately reduce business risk. Suitability risk also can be reduced as you are following a defined process.”
Aamina Zafar is a freelance journalist
